Directional Bias

Murphy's Diary

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3 min read

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Sep 19, 2021

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Video — https://vimeo.com/558000006/69dca2e0bd

• Swing highs and swing lows are the most crucial points and reaction around these tells us to get in and out of the market.
• Origin — Area where expansion occurred that led to shift in MS. We’ll look for continuation of expansion in this area.
• Price movement is a function of liquidity. Where there is liquidity there will be expansion. When there is expansion, there needs to be a rebalancing(retracement). Market goes from inefficient (expansion) to efficient (consolidation or retracement),Motive of looking at the daily chart is to have a clear picture of where the market is going that day. Whether it’s going to take the previous day’s high or low.
• Order Flow — HH and HL is uptrend. LH and LL is a downtrend. No clear direction is consolidation.
• On key swing highs and lows, we can anticipate sensitivity but we take trade based on how the price reacts there. We don’t anticipate the reaction.
• In bullish order flow, we are looking for previous days lows to be defended and highs taken out and vice -versa.
• If we do get this wrong intraday, we normally know in a day and can recoup by taking another setup in the direction the market is intended to go.
• Whenever we have an expansion, we keep trading in the direction of expansion until there is a change in orderflow.
• When we see a close above a swing, we want to see some consolidation and run of a swing low and then expansion to the upside.

• In the chart below, we didn’t take the high on the pointed candle but the order flow is still bullish as we are continuously taking the highs. It will remain bullish until we start running lows. We are still in the previous day range, so the previous day high is still the target. This is just a run below the open to get people shorting.

• Stop run

• All we need to do is…keep targeting the previous day high till the order flow is bullish. At a key swing, there will be consolidation and once we get a close above or below previous day high/low, we know which direction the market wanna go. There will be stop hunting too before the move.
• Intraday plays can be taken based on the run of previous day highs and lows according to the daily orderflow.
• Close of this candle tells we wanna go lower after the consolidation

• Candles that take both sides of the range(high and low of the previous day), tell the price is stalling and liquidity is being grabbed for reversal.

• This is a common pattern — price goes down, creates a swing low, closes above the swing structure telling that it wants to go up…then consolidates….sweeps a swing low and then continues up.